Unusual Whales

DeepSeek could be an extinction-level event for some venture capital firms

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China's DeepSeek Disrupts AI Landscape with Open-Source Breakthrough

Chinese AI company DeepSeek has reportedly developed AI models that rival OpenAI, achieving this feat with significantly less money, chips, and energy.

Unlike many competitors, DeepSeek is an open-source project initially launched by a hedge fund. For now, its focus appears to be on developers, but its product scope could easily expand, especially after it topped Apple’s App Store yesterday.

Why It Matters

DeepSeek’s rise could spell disaster for venture capital firms that invested heavily in foundational model companies—particularly those still struggling to productize or achieve wide distribution.

The capital required to compete in this space is astronomical, and DeepSeek’s leaner model challenges the core thesis many VCs relied on.

  • If web3 and nanotech were industry disruptions, this could be a nuclear bomb.
  • Investors are already concerned about how this development caught them off-guard. Some deals currently in progress may even be paused as firms reevaluate the landscape.

Caution Ahead

Despite the excitement, much remains unknown about DeepSeek, including whether it truly achieved its progress with the minimal resources it claims.

Moreover, national security concerns could pose significant barriers for DeepSeek’s adoption in the U.S., following trends seen with apps like TikTok.

For now, while investors aren’t panicking, there’s a sense of unease—and a realization that DeepSeek could change the rules of the game in AI development and funding.